No they don't, because the banking system is fractional reserve. Pretty much every bank has more outstanding loans that deposits (even if part of those loans is to the government).

Can you point to a bank with more loans than deposits in its balance sheet?

(Honest question, I'm curious.)

As far as I can see the banking system in aggregate has more deposits than loans:

https://www.federalreserve.gov/releases/h8/current/default.h...

Thanks, I think there's something faulty in my understanding of terminology. By "deposits" I was understanding "deposits backed by holdings at the central bank".

The original question I was trying to answer was "If everyone gets cash from loans, who'll be the depositors putting cash in the bank to be loaned?". I just don't think that question is well-posed. A bank creating a loan requires new cash deposits of only R x loan_amount, where R is the reserve requirement. For making payroll this ought to be almost nothing.

> By "deposits" I was understanding "deposits backed by holdings at the central bank".

Ok. That would be reserves. But it's not like some deposits are backed and others are not (leaving aside the existence of different kinds of deposits) - what you have is a total amount of deposits and a total amount of reserves.

Yes, I understand that. But I don't understand why we couldn't have a system whereby, to cover payroll, a bank creates a loan to each company every payroll day, transfers cash to the (FDIC insured) bank accounts of employees, and then liquidates some of the company's T-Bills over the next couple of hours or days to cover it. That seems like a way of making sure everyone's paid without companies having to risk > $250k balances at any time.